Some common insurance scams that are raising your premiums

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Crawford Frazer

You may be the kind of person who makes informed decisions about insurance and always pays premiums on time. If so, you may assume that your dependability will make you a more attractive customer -- and lower your insurance costs. But insurance fraud makes everyone's premiums go up, even those of honest customers.

Insurance fraud is on the rise. The National Insurance Crime Bureau received 70,295 questionable claims referrals in the third quarter of 2010, a 12 percent increase from the same period in 2009.

The Coalition Against Insurance Fraud reports that 2009 saw an increase in fraud across the nation, in categories like auto insurance, medical treatment and employment benefits. The struggling economy, it says, appears to be a factor.

Types of fraud

Some of the most common insurance scams, according to Lawyers.com, involve outright lies and elaborate set-ups.

Slip-and-falls: A person will pretend to be injured after slipping and falling -- and then file a personal injury claim against the homeowner's or business owner's insurance.

Fake car accidents: Some people stage car accidents and fake injuries to collect property damages and medical treatment payments. The problem seems to be exacerbated in no-fault states like New York. In 2009, fraud accounted for about 20 percent of no-fault claims, according to the National Insurance Crime Bureau and the New York Insurance Association. That adds up to costs of $230 million for insurance companies and, ultimately, consumers.

Property damage: This scam involves property owners intentionally damaging their property (setting their cars on fire, for example), exaggerating the extent of damage from real accidents or lying about having damaged property altogether.

Truly unscrupulous

If these broad categories aren't alarming enough, consider some specific examples of scam artists. The New York Alliance Against Insurance Fraud compiled a list of fraud examples in 2010. They included:

A woman, age 56, who claimed she could no longer teach because she was “totally disabled.” She collected $73,000 in workers’ compensation benefits before it was discovered that she was working at a youth sports camp at the same time.

A man, age 34, who continued to collect his mother’s workers’ compensation benefits for more than a year after she died.

A man, age 33, who collected $19,000 for an Acura Integra he reported as stolen to his auto insurance company -- until he forgot to pay rental fees for the storage unit where he kept the car and his scam was uncovered.

The price you pay

When insurance companies lose money as a result of high claim payments, they compensate by raising premiums -- which means everyone's policy has a higher price tag. If you suspect fraud, report it. Your state has a fraud bureau, but you also can contact the insurance company involved, your state’s attorney general or the National Insurance Crime Bureau.